Insurance brokers face uncertainty over health care reform

VICTORVILLE • Few children grow up dreaming to be an insurance agent. Neither did Casey Armstrong.

The Apple Valley native suffered a major stroke when she was 21 and spent six weeks in the hospital. Health insurance was the last thing on her mind.

But when she got out of the hospital, she watched her father, who ran his own insurance agency, coordinate her physical and speech therapies.

"They know who to call and what needs to be done," Armstrong, 34, said.

She had already been working for her father's firm to earn a paycheck, but she began taking her job more seriously.

Ever since she started her own firm, Armstrong Fairway Insurance Center, at 26 years old, she has helped small businesses and individuals in the High Desert negotiate their way through the complex health care system.

Health insurance agents spend most of their time gathering quotes, explaining coverage and helping clients choose from different options. These tasks are often handled by the human resources department at large companies. Nearly seven out of 10 small businesses and more than one out of three individuals purchasing health insurance on their own use a broker to buy their policy, according to the Kaiser Family Foundation.

"I know what it feels like to receive denials and to be desperate for that next rehabilitation treatment to be approved," Armstrong said in a National Association of Health Underwriters newsletter. "I have been in that position where I had to make that decision to pay my mortgage or my health insurance. Health insurance is a complex and confusing world to the average consumer. I try to help them understand their coverage before something happens."

But now Armstrong and her industry are facing a major challenge from the recent health care reform upheld by the U.S. Supreme Court. The Patient Protection and Affordable Care Act includes provisions that could alter or even eliminate some roles of insurance brokers.

"My industry is taking this very seriously," said Armstrong, who served as the youngest president of the Inland Empire Association of Health Underwriters. "We hold webinars and meetings, trying to figure out this law page by page. It's a big deal."

The new law requires states to create health insurance exchanges — one-stop markets where individuals and small businesses can easily compare and shop for different health plans online. The exchange will also have navigators to help customers within the program starting in 2014. Good news for consumers, but they may by-pass brokers.

"As of right now, there is no place for agents in the exchange at all," Armstrong said. "I am trying to keep a positive outlook with the exchange. There are a lot of unknowns as of right now."

Under the ACA, insurance companies must spend at least 80 percent of their income from premiums on medical care, leaving 20 percent or less on administrative and marketing costs. Because broker compensation is considered an administrative expense, insurers may reduce reliance on agents.

However, Armstrong said many California insurers already spend around 85 percent on medical care.

Brokers say the most notable trend in the market is increasing costs, especially premiums, according to Kaiser's survey. The average annual premium has gone up by 12 percent so far this year in San Bernardino County, Armstrong said.

If costs keep rising, business owners and individuals may start dropping their coverage and paying the penalties instead, Armstrong said. Some of them would wait to get coverage until they get seriously ill, which would raise health care costs across the board. Insurers cannot deny coverage for clients with pre-existing conditions under the new law.

"If I knew if I could pick it up after something happens, why would you buy it in the first place?" Armstrong said.

Proponents of the law say the reforms will eventually reduce the overall health care costs.

In contrast to the general public, who is generally split on the Affordable Care Act, 54 percent of health insurance brokers have a very unfavorable view of the law, according to Kaiser.

Ryan McEachron, president and CEO of ISU Insurance in Victorville, said the individual mandate could increase traffic for brokers, but he also fears some employers may choose to stop offering health benefits.

"It's kind of a toss up," McEachron said.

Rather than working against the changes, Armstrong said she will work with them. She sees both opportunity and uncertainty.

"We obviously needed some kind of reform," she said. "Some things did need to change and some things do need to change.

"I'm trying to wrap my head around how this is going to work and figure out where my place is. I'm 34 years old. I have another 40 years left and I'm all in health insurance. This is it for me."

Tomoya Shimura may be reached at (760) 955-5368 or TShimura@VVDailyPress.com. Follow Tomoya on Facebook at facebook.com/ShimuraTomoya.

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